Thursday, October 15, 2009

I - N - S - A - N - I - T - Y

Politicians in Washington keep telling us that it is the financial system that needs regulation.

What Washington won't tell you is that the greatest risk to our economic system lies not with Wall Street. It lies with the federal government's catastrophic debt -- and the wounded U.S. dollar -- inflicted upon us by the very same politicians scapegoating the financial services industry.

About half of the federal budget must be paid for by borrowing money from foreigners, primarily from China. This behavior has frightened global investors and severely weakened the dollar.

In June, the Congressional Budget Office warned that the "federal budget is on an unsustainable path -- meaning that federal debt will continue to grow much faster than the economy... [and] Rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly..."

"... Large budget deficits [will lead] to more borrowing from abroad and less domestic investment, which in turn would depress income growth... The accumulation of debt would seriously harm the economy. [Or] if spending grew as projected and taxes were raised in tandem, tax rates would have to reach levels never seen in the United States [95%]."

Yet the same federal bureaucrats who decry the financial system are themselves addicted to spending far beyond their means. But why would they care? They will be long gone by the time their bills will come due.

Dichotomy: outside the U.S., the "biggest story in the world economy is the continuing fall of the U.S. dollar" (Wall Street Journal); while inside the U.S., the mainstream media gleefully markets the proposition that that Congress' "Baucus Bill" is cost-neutral.

Even before the health care bill becomes law, $9.3 trillion of new deficit spending was added to the national debt. The Baucus Bill supposedly gets its cost neutrality by slashing Medicare ($400 billion) and raising taxes on health care insurance premiums (another $400 billion).

But the mainstream media forgot to tell you that even the CBO doesn't trust its own numbers! The head of the CBO wrote Baucus, telling him that -- if Congress failed to cut Medicare (highly likely, given seniors' voting habits) -- the new entitlement would add catastrophic new debt to the federal budget.

But even if the numbers were real, the illogical thinking is shocking. President Obama told us that passing health care reform was central to a healthy economy. The Democrats proclaim victory with supposed deficit neutrality while our current "unsustainable" deficit grows like a devastating form of cancer.

Instead of just starting with cuts to Medicare and adding insurance taxes -- thereby cutting the 10-year deficit by $1 trillion (including interest) -- the Democrats are attempting to nationalize 20% of the economy as a payoff to the SEIU bosses who contributed $27 million to Obama's 2008 campaign.

Helping a few million uninsured people get access to health insurance is a noble goal, but not at the expense of permanently destroying the United States economy. Adding entitlement programs while we can barely crawl out of the current deficit hole is suicidal behavior.

Washington must:

• Slash federal spending on needless programs • Begin to raise the eligibility age for Medicare and Social Security • Starting offering optional, private savings accounts to young people to eventually replace the dying Medicare and Social Security programs

We have no choice! We must stop the insanity before it leads us to economic devastation.

3 comments:

Anonymous
said...

Something left out ... I quote Dick Green at briefing.com ...

"With one-third of the total debt being owed to intra-governmental agencies, the interest payments on that debt are made by "selling" those accounts more Treasury bonds. This presence of a "willing buyer" who accepts whatever interest rates are set by other buyers is a powerful force in making the US total debt levels tolerable. "

Around 52% of intra-governmental debt is owned by Social Security.

We have been subsidizing our Gov't spending via SS payments. This has distorted the actual spread demanded for US treas debt. It has deferred the day of reckoning and will serve to make it more fantastic.

As the Soc Sec fund sells treasuries .. you think they will make a profit ... or even break even?!! HA!

Soc Security will be unable to match liabilities .. it will default - or US Gov will attempt a baiilout - which will kill the market for any other treas bonds held at Soc Sec fund ...

The change in treas prices will be blamed on wall street speculators etc. etc. I believe this will end in an attempted devaluation of dollar .. more than now

I agree, I really, really wish Reagan and Bush hadn't wracked up such mammoth deficits by dramatically increasing spending while cutting revenues, and then deregulating the financial industry, causing the economy to implode. If only we didn't have the Republican Party Fing everything up, we'd be doing great. During the Clinton admin, things got better (so of course we needed to impeach him). Good to see we at least now agree that deficits are bad. Because when W was president, Repubs voted to increase the debt limit mutiple times without complaint. It almost makes one think their principles are strongly dependent on which party is in office. And that's the difference between politics and governing. Maybe someday we'll find a republican interested in the latter, but I doubt it. You can't govern if you don't believe in government.

Reagans spending was among the lowest when measured as a percentage of GDP.Johnson's and Kennedy's social security, Medicare and welfare were unfounded liabilities and no plans to pay for them were made. It was a ponzi scheme. The worst thing about welfare was that the largest gift contributions went to unwed expecting mothers. This led to skyrocketing unwed mothers, skyrocketing birth rates in impoverished areas and skyrocketing poverty l as a result it created more government expenses to pay for expanding welfare. A well intentioned project created a disaster of results long term.That it combination with Vietnam war and korean war and inability to admit overspending and adjust gold prices upward forced US to temporarily close gold window which became permenant as they owed over 30,000 tonnes of gold but only had 8000 or so at the time. Bush expanded Medicare too. It is a bipartisan problem, but the problem started when we engaged in a ponzi scheme of social security and Medicare that would never be able to be paid for.